Web 2.0 Summit: Sequoia Capital’s Michael Moritz

By Eric Savitz

Moritz says the story he would have done as prelude to this conference was all the dire pronouncements of the newspaper business over the last 9 months; and second is another story about another aspect of media today, which is 20% of viewers who now skip television ads, that would have been one other thing; and third thing, gone to China, and maybe the story would be about TenCent and Baidu (BIDU), each with market cap north of $10 billion.

John is asking: To extent there is froth, can what are differences with previous bubble?

Moritz: Last time we talked, business went south very soon after we met…Great news about these times of enthusiasm, inevitably, there will be carnage, but also a handful of companies will emerge to become significant companies; it is what investing and living in Silicon Valley has always been about.

John: Seeing cyclical downturn in Internet advertising? Is that happening? On deeper level, have we solved problem of Internet advertising? How far along are we in terms of getting it right?

Moritz: On softness in ad business now, clearly element of seasonality to advertising business on the Web; every April, you wonder, what is happening, traffic slowly down, not as zesty as March and February. Same thing tends to happen in August with summer vacations. This year, softening in consumer spending, and Web companies are not immune from that; they are affected by that; also ad sector, perhaps financial services, perhaps others; they are of side not immune from general industry trends. Overall, if you zoom out, still, despite multiple companies with billions of dollars in ad sales. And as for other question, he says there is still plenty to do.

Moritz says best companies to invest in are collision of market that is emerging and astonishingly talented people with product or service.

John: What markets now?

Sequoia: You would be surprised at how mundane the answer might be. A lot of people always feel they have to go to new pasture to make an investment, and that existing pastures are very well populated. I bear in back of mind: it is 1986, 10-12-13 years after first PC. Conventional wisdom was so many PC companies out there – IBM, DEC, Compaq, Atari, Apple – and the conventional wisdom was that it was a very cluttered market. And along comes student in Texas now household name around the world. (Michael Dell.) Today, look at travel sector, conventional wisdom all that is done; then two years ago, Kayak launched, and is thriving by doing something new and different and compelling for consumers and growing at a very, very fast clip. Same thing with Google in 1989, was perceived as a late entry. Some of our best investments have been companies perceived as late entrants.

John: You left Google board in May. Why?

Moritz: I’m not on board of any public company. Focus of my existence is Sequoia Capital, and smaller companies we’re invested in.

John: Not that you have stealth search company that is a Google killer?

Moritz: As usual, fiction far ahead of reality.

John: Are there questions of strategy that Google faces that you can comment on?

Moritz: I wish every company we have been involved in had made the mistakes that Google has made…the leaders of the company worry all the time, about things that they think are missing from product lineup, or strengthening management team, or competing in markets around the world…this is not a complacent group of people. But stand back, what has been wrought at Google…is an extraordinary marvel. Point to other companies that have achieved even half as munch as Google since the end of World War II, and you would be hard-pressed to fill up one hand.

Moritz: Lesson of Google: Larry and Sergey taking their time and being deliberate, and being prepared to say no. Most people are in such a panic because they have product deadlines to meet, or open reqs; most every leader and director of every company will fall prey to temptation to lower hiring standards to fill the spot; that is very much a short term fix. Very glad Larry and Sergey were insistent in take their time, and finding Eric Schmidt, thanks to John Doerr, to join their company. I am huge, huge believe that greatest possible thing that can happen to an investor in a company is to be blessed with the sort of personal people who start company with enthusiasm, verve, talent and develop and grow with that company. No accident that the really great companies – Microsoft, Oracle, Intel, Bill Gates, Steve Ballmer, Larry Ellison, Gordon Moore, Larry and Sergey – the founder grow up with the companies, and do not lose the zest they had in the early years. Look at the history of Apple over the last 20 years and what happens when the founder returns.

John is asking Moritz about platform companies; he is wondering if Facebook is similar to other ones?

Moritz: There are traits of those companies; you get the whiff of them, more than a whiff, at Facebook. When communications flows through one of these companies, good things tend to happen on the Internet. Facebook is this incredible communications system. That would be one common theme – Google, PayPal, YouTube – company that few, than 100s, than 1,000s then millions and 10s of million can do something for themselves. Enable millions of people to do something they haven’t done before.

John is asking about old entrepreneurs versus young ones.

Moritz: Let’s put it this way: Mozart was dead at age 35.

Now audience Q&A: Robert Peck, the Internet analyst at Bear Stearns is asking what will happen to Yahoo and Jerry Yang. He is also asking who Facebook should take money from.

Moritz says he is not going to offer Yang gratuitous advice. And he dodged the Facebook question.

One last one: See investment opportunities in enterprise technologies?

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Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.